Pages

Thursday, November 1, 2012

IMF says Greek loan talks stuck as bankruptcy looms

ATHENS: Greece's
negotiations with international lenders for desperately needed rescue
funds some two weeks before bankruptcy looms are stuck, the IMF said
Thursday, sending Greek stocks plunging.

The International
Monetary Fund said the talks were stalled over the conditions for
financing Greece as it seeks a two-year extension to meet fiscal goals.

While
Athens has made "good progress" on fiscal and structural reforms, IMF
spokesman Gerry Rice said in Washington, "an understanding must also be
reached between Greece and its creditors on financing terms consistent
with debt sustainability."

That news triggered a five percent
drop in Athens' main ATHEX stock index, which tumbled below the 800
point level to close at 761.24 points.

Shares in banks, which are
awaiting some of the rescue money to shore up their capital, were the
worst hit, with the banking stocks sub-index down by 11.7 percent.

Greece,
the IMF, the European Union and the European Central Bank, known as the
troika, have been locked in discussions for weeks on revising terms for
the country's bailout after it fell short of targets which needed to be
met for the release of the next installment of funds from the three
lenders.

Athens has asked for the fiscal targets to be pushed
back another two years, to give it more room to rekindle economic growth
after a crushing austerity programme sent it into a deeper recession
than the lenders had expected.

Greek Prime Minister Antonis
Samaras has said the coffers in Athens will run dry on November 16 --
when a three-month treasury bill worth five billion euros must be repaid
-- unless his country receives the next 31.2 billion euros ($40.4
billion) in rescue funding.

Samaras had announced on Tuesday that
his government had agreed with the mission of troika auditors in Greece
on the terms of a new 13.5 billion euro austerity package needed to
unlock the next instalment of rescue loans.

Accordingly, the
finance ministry on Wednesday introduced a budget and a three-year
economic programme pledging the required level of cuts in 2013-14.

But
on the same day the European Commission warned that a debt deal with
Athens was still pending. Eurozone finance ministers are due to make a
final decision on the payout by November 12.

Finance Minister
Wolfgang Schaeuble of Germany, Europe's paymaster, noted that
considerable progress had been made in the talks with Greece "but there
is still a lot of work to do."

The 2013 Greek budget gives a grim picture of the outlook for the country.

It
predicted that gross domestic product in Greece -- already in its fifth
year of recession -- would shrink by 4.5 percent compared with a
forecast of 3.8 percent a month ago, although below the 6.6 percent
decline expected for this year.

The 2013 public deficit forecast was raised to 5.2 percent from the previous prediction of 4.2 percent.

The
government is planning 9.4 billion euros ($12.2 billion) in cuts which
will affect mainly state wages, pensions and benefits that have already
been drastically reduced over the past two years.

But it will still need to borrow over 68 billion euros next year, the draft budget said.

"If the deal does not pass... the country will be led to chaos," Samaras warned on Tuesday.

The
IMF on Thursday also pushed for wealthy Greeks to pay their fair share
of the tax burden amid uproar in Greece over a list of alleged tax
evaders.

Greek investigative journalist, Costas Vaxevanis, was
arrested Sunday after publishing the so-called Lagarde list, named after
IMF chief Christine Lagarde, who in her previous position as French
finance minister in 2010 passed a roster of some 2,000 Greeks holding
Swiss bank accounts to the Greek government.

The crushing
austerity measures in Greece, with no sign of relenting, have led unions
to threaten more social unrest, announcing a 48-hour general strike
starting November 6 to coincide with debates next week on the budget and
other reform measures.